Most ER collets have the ability to contract about 1mm under the specified size. However, most of the collet nuts you are going to find on 5hp and under spindles, don't have enough threads on the collet nut to fully collapse the collet at the lower bounds and you can bottom out the threads on the nut...and subsequently HAVE TO cut the nut off with a whizzer wheel because it won't budge even with a 4' cheater bar. Been there...as have others. Lesson learned.

Haas has some really helpful videos on YT. This one goes over ER collets. Have a look, specifically around the 6:30 mark.

FYI - SB did send a few DT series tools out the door with dual Z axes on them. If drilling a lot of holes, you might consider a corded drill on one Z and spindle on the other. There's nothing better than an actual drill for drilling, with the proper RPM and convenience of a chuck.